Wisconsin Energy eyes state-owned units; biomass generation

Wisconsin Energy (NYSE: WEC) remains interested in potential purchase of several small generating units currently owned by the State of Wisconsin that the state could elect to sell.

“This takes a piece of legislation,” CEO Gale Klappa told a financial analyst during the company’s Oct. 31earnings call. Such legislation would happen in 2013, “if it happens,” Klappa said.

“There are 37 generating units. Some of them are quite small” and many of them will required environmental controls, Klappa said.

On other generation items, Klappa said a 50-MW biomass plant should be completed by the end of 2013. There represents $245m to $255m cost for WEC’s We Energies. Construction on the Rothschild biomass plant began in 2011.

Like the 160-MW Glacier Hills wind project, which went into service in late 2011, the biomass plant will WEC meet Wisconsin’s growing renewable energy portfolio standard.

Wisconsin Energy going from 5% renewables in 2010 to 10% in 2015 to meet state renewable energy portfolio standard. The standard requires large power companies like WEC to hit a 10% renewable ratio by 2015.

The company is looking at a life extension project at the Presque Isle power plant that would be a joint venture with Wolverine Power Cooperative. Wolverine would fund the cost of environmental upgrades and become a part owner of the plant, while Wisconsin Energy would continue to run the plant.

Wisconsin Energy recently completed new environmental controls on its original Oak Creek coal units, Klappa noted.

The company is seeking regulatory approval to start blending western coal from the Powder River Basin along with the currently-used eastern bituminous coal at its new Oak Creek power plant. That could start happening in 2013, Klappa said.

Company officials said 80% is the most PRB coal they can envision burning at Oak Creek for several years. WEC would ultimately like full coal flexibility to burn anywhere from 100% PRB to 100% Eastern bituminous coal at the plant, officials said.

Construction of the Oak Creek expansion units and other significant generation built by Wisconsin Energy in recent years will be increasingly important now that Dominion (NYSE: D) plans to retire the 560-MW Kewaunee nuclear plant near Green Bay.

Klappa also noted that the Kewaunee retirement could affect some transmission planning in the region.

Warm temperatures help earnings

Wisconsin Energy reported net income from continuing operations of $156.1m or 67 cents a share for the third quarter of 2012. This compares with net income from continuing operations of $129.8m or 55 cents a share for the third quarter of 2011. 

Factors contributing to the positive third quarter performance include lower operation and maintenance costs, warm summer temperatures, stronger recovery of fuel costs, and the positive impact of the company’s share repurchase program.

For the third quarter, consumption of electricity by small commercial and industrial customers grew by 0.7%, while residential electricity use was down by 1.2%.

“Our third quarter performance was strengthened by near record energy demand in early July as temperatures rose to the 100-degree mark across the region,” Klappa said. “However, high humidity and warmer –than-normal temperatures persisted throughout the third quarter last year. So our residential sales registered a small decline compared to the third quarter a year ago,” Klappa added.

Electricity use by large commercial and industrial customers dropped by 8.3%, WEC reported. The decline was driven by lower sales stemming from a planned outage at a major iron ore mine and two customers adding self-generation.

At the end of September, the company was serving approximately 3,300 more electric customers and 5,200 more natural gas customers than a year ago.

The company natural gas consumption has risen dramatically in the past couple of years while the coal burn has decreased. WEC will seek regulatory approval in the first half of 2013 to convert its Valley natural gas power plant in Milwaukee from coal to natural gas.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.